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Vocus wants NBN structurally separated if direct sales team not binned

Telco wants NBN to avoid direct engagement with end-users and to not overbuild existing enterprise fibre.
Written by Chris Duckett, Contributor

Vocus has continued its fight to get the National Broadband Network (NBN) to stick to what it was created for: Being a broadband wholesaler, and avoid entering into contracts with end-users.

Writing in a submission to the inquiry into the business case for the NBN and the experiences of small businesses by the Joint Standing Committee on the NBN, Vocus said that NBN should have its direct sales unit shut down to prevent it from discriminating between its wholesale customers.

"In the absence of a complete shut-down of NBN's direct sales team, at a minimum NBN's Enterprise business should be subject to separation requirements with equivalent regulatory oversight to Telstra's Structural Separation Undertaking," Vocus said.

"This should require NBN's wholesale staff to work separately from its direct sales staff; and should include legally enforceable 'Protected Information' requirements."

Vocus said NBN is entering into contracts with end-users to use only NBN fibre and then having to find retailers that supply the service.

"This approach leads to an absurd outcome where NBN overbuilds competitive fibre to deliver a 100% NBN solution -- and an RSP may even find itself contractually required to use NBN fibre even at locations where they have their own fibre installed," the telco wrote.

"Overbuilding existing competitive fibre to fulfil 100% NBN contracts is not only an irrational waste of NBN's taxpayer funding, it also strands existing assets and undermines private-sector infrastructure investment."

See also: The ACCC is going to need a standard speed measurement for one ADSL2+

The telco pointed to NBN's formal warning in October from the Australian Competition and Consumer Commission for providing Macquarie Telecom with different commercial terms compared to other RSPs when it upgraded NBN infrastructure for business-grade services.

The warning stated that it agreed to upgrade Macquarie Telecom's NBN infrastructure for Enterprise Ethernet at no additional cost and reduced the amount it would have to pay, but it did not offer the same terms and conditions to other RSPs for their respective Enterprise Ethernet build-outs.

NBN also provided Macquarie Telecom with indicative pricing information for its new Enterprise Ethernet Service months before it gave the same information to other RSPs, the submission revealed. This is despite an RSP requesting for the indicative pricing information at around the same time of when NBN provided it to Macquarie Telecom. Separately, another access seeker was told by NBN that the pricing information would not be available until months after it had already given the information to Macquarie Telecom.

In its submission, Vocus called on the government to issue NBN with a new statement of expectations once the build phase of the network finishes in June, stating NBN should not "overbuild competitive fibre" nor engage directly with end-users.

A similar view was expressed in an earlier submission from Optus, which called for "clearer guidance" for NBN, and for the government-owned wholesaler to not overbuild existing enterprise networks.

Image: NBN

"Such advice would bring the approach of NBN Co back to its original purpose in the enterprise market – to support competition and allow all service providers to compete for national accounts," Optus said.

Optus said NBN's network provides an avenue for other telcos to challenge Telstra's dominance of the enterprise market, with the incumbent holding 74% of the market and having a much larger fibre footprint.

"Telstra Enterprise is responsible for revenue of AU$8.2 billion, around 30% of Telstra's overall revenue. This compares to AU$1.4 billion of revenue for Optus Business, AU$758 million for TPG Enterprise, and AU$710 million of revenue for Vocus' enterprise services," Optus said.

"Telstra recently stated that its fibre network extends to over 250,000km and has 60,000 connected buildings. This compares to Optus with an estimated 48,000km of fibre and 18,000 connected buildings; TPG has over 27,000km of metropolitan and inter-capital fibre, with an estimated 1,500 connected buildings; and Vocus has more than 5,500 lit buildings, 15,020km of inter-capital fibre and 9,500km of metropolitan and regional fibre in major centres."

Meanwhile in NZ: New Zealand 100Mbps fibre plans delivering 99% of promised speeds

When offering services to nation-wide enterprises, Optus said it would need to purchase wholesale services from Telstra, and since that area is not "effectively regulated", it is difficult to compete with Telstra on account that "require a large input of Telstra Wholesale services".

Optus added it has seen examples where NBN has "actively discouraged the use of competitive infrastructure", including in cases where a mixture of NBN and existing enterprise fibre would have been cheaper.

"For example, following an agreement signed directly with NBN Co, we understand one enterprise customer mandated 100% NBN FttP solution for all its national sites. However, Optus could have utilised its own fibre network for around a third of those sites with the remaining sites utilising NBN FttP lines," it wrote.

"The mixed network solution would have resulted in prices substantially cheaper to the end-user. However, due to the direct engagement between NBN Co and the end-user, the end-user had ruled out the possibility of using the mix network solution."

The future could be worse for retailers, Optus said, with a future wholesale agreement to allow NBN to use confidential information from retailers for marketing purposes.

Optus recommended that competition would be improved by overbuilding Telstra's network, but not those networks owned by Telstra enterprise competitors, like itself.

For its part, Telstra pointed out in its submission that in a purely financial outlook, taxpayers would not get a return on the AU$49 billion invested into NBN, but once social return was added, it would pay for itself.

"It is therefore important our regulatory and policy settings seek to optimise the broader social and economic return from taxpayers' investment in NBN Co, and not focus solely on improving NBN Co's 3% internal rate of return," Telstra said.

"Indeed, focussing too much on NBN Co's private returns will put at risk the broader social and economic returns that justify taxpayers' investment."

Telstra said NBN relied too much on temporary discounts and rebates, and ended up putting unnecessary risk and uncertainty on retailers.

"To illustrate, the latest 1 January 2020 edition of NBN Co's Discounts, Credits and Rebates list is the 27th version of this document issued by NBN Co since the first issue in November 2017 and currently runs to 167 pages (covering 45 different types of discounts, credits and rebates as set out in Part Band subject to 48 different sets of terms and conditions as set out in Part C)," it said.

"Temporary discounts and offers should be replaced with permanent and predictable pricing that provides RSPs with certainty and the incentive to compete. Complex product and pricing constructs (for example, NBN Co offers multiple 100 Mbps consumer products at different prices points) should be replaced with simple ones."

Telstra similarly pointed out NBN was dealing directly with enterprise customers, overbuilding existing networks, and there was a lack of transparency into how NBN was ensuring non-discrimination following its formal warning.

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